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Sovereign Gold Bonds F.Y.2016-2017 – July2016- Series 1

Reserve Bank Of India on behalf on Govt Of India will issue first series ( Tranche IV )of Gold bonds in financial year 2016-2017.This Gold bond issue will open on July 18, 2016.

 

Gold Bonds July 2016

Features of Gold bonds are as follows:

  1. Issue open date: July 18, 2016.
  2. Issue close date: July 22, 2016.
  3. Issue Price: INR.3119 per Gram of Gold.
  4. Tenure:Tenure is 8 yrs but there will be exit option from 5th year which can be exercised on interest payment date.
  5. Minimum size: 1 unit (Gram) of gold & in multiples of 1 Gram thereafter.
  6. Maximum size : 500 Grams per individual in financial year.
  7. Interest rate:Fixed rate of 2.75% p.a. payable semi-annually on initial value of investment.
  8. Redemption value:Redemption price will be in INR based on previous weeks simple average of closing price of Gold of 999 purity published by IBJA – Indian Bullion & Jewelers Association.
  9. Taxation:Interest received semi-annually will be taxable.Capital Gains arising on redemption of Gold bonds has been exempted.On transfer of bonds,indexation benefit will be provided to long term capital gains.
  10. Collateral : Gold bonds can be used as collateral for loans.Loan to Value ration will be as mandated by RBI time to time.
  11. Tradability : Gold bonds are tradable at exchanges from date notified by RBI.
  12. There is no physical Gold involved in entire process.Redemption value will be in terms of INR.

How to apply for Gold Bonds:

Investor along with KYC document can visit banks,post office or stock broker for application form.If in past you have invested in Gold bonds,then you will need to enter RBI investor ID.

Should you invest in Gold bonds?

Its impossible for any one to guess Gold prices after 5+ years as its function of both core prices & currency.But,Gold bonds can be preferred over physical gold.If requirement of physical gold is after 5+ years then consider investing in gold bonds.Investor will get interest as well there won’t be any storage risk.

Details Of GOI – Sovereign Gold Bonds 2015:

Recently Govt have announced about developing a financial asset – sovereign Gold Bonds – as an alternative to purchasing Gold in physical form.Prime Minister Shri Narendra Modi will launch the Gold bond Scheme on Nov 05, 2015.

Few details of Gold bonds are as follows:

  1. Basis of Gold Bond price issuance :Gold bonds will be issued on a basis of previous week’s simple avg of 999 purity gold prices ( on closing basis ) published by IBJA – Indian Bullion and Jewelers Association.
  2. Imp Dates :Gold bonds will be issued in one or more tranches.First tranche will open from Nov 05 to Nov 20 , 2015 and Gold bonds will be issued on Nov 26,2015.
  3. Minimum subscription : 02 Grams and max subscription is 500 grams p.a. per investor.
  4.  Interest payable -@ rate of 2.75% p.a.and interest payable semi annually.Interest will be paid based on initial value of investment.
  5. Gold Bond Holding :Bonds can be held in demat or physical form and can be traded at exchanges.
  6. Maturity period : 08 yrs from date of issuance.
  7. Premature redemption : possible from 05th year on wards on any coupon payment date.
  8. It is mandatory to provide bank a/c details to facilitate interest payment and maturity value.If gold bonds held in demat account, then interest / maturity amount will be credited in account linked to demat account.
  9. Gold bonds can be used as collateral for loans – similar to physical gold.Loan to value ratio as decided by RBI time to time.
  10. Maturity / redemption price will be on the basis of previous weeks simple avg 999 pure gold closing prices.

Basic idea behind Gold bonds is to reduce physical gold imports from foreign countries.Additional benefit available for Gold bonds is in terms of Interest paid.

If any one is bullish on gold over a longer period of time or need gold in physical form only after few years ( assume physical gold  purchased from maturity / redemption amount )  can think about Gold bonds over physical gold.Forms available and can be submitted at nationalized,scheduled commercial banks and designated post office branches.

Why Systematic Investment (SIP) In Gold Makes Sense:

Few Days back,we have one post on Platinum prices when Platinum prices deepened suddenly & roll back.This post can be viewed Here: What Can Be Learned From This Platinum chart?

I think Gold is going on similar way & there is sudden deep in the prices.Number of investors have this question in the mind – should we buy Gold or not?

One can’t say where will be the bottom but as history of other commodities is concerned,alternate cycles of bullish-bearish phase have witnessed & one can expect same thing about Gold.

Systematic Investment in Gold:

  • One should understand that Gold is an international asset & its not like individual share traded at the exchange….where prices of certain shares never come up or share gets de-registered.
  • Unlike  other metals or commodities,Gold prices are supported by strong domestic demand & this is the most favorable factor for Gold.
  • Each & every asset has to follow Bullish – Bearish cycle & so even if Gold prices deepened more ,it has to follow bullish trend in future.
  • Such kind of pattern i.e.Sharp deep & then recovery have experienced across all the commodities in history & we can expect same from Gold also.
  • If systematic investment works in Equity then it should work for any volatile asset.

I think it doesn’t matter much in which form individual won the Gold.It may be Physical Or Paper..its ultimately individual choice.

One may not have fascination with Silver or even for Platinum But Gold should be part of the portfolio & one should think to buy Gold systematically, always…

One can not say about annual returns of Gold but Gold purchased in systematic way or value averaging way likely going to benefit the investors…

 

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Information provided on this blog is for general purpose only & not investment advice.Please take advice of SEBI Registered Investment Advisors before taking any investment decision.
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